Four-Plus One Streams of Wealth: The First Two Streams

This story is Part Two of Four. The first is 

Education, Training and the Middle Class

Wealth Creation

I propose that there are Four-Plus-One Streams of Wealth creation, all driven by work, which creates and distributes wealth.

The rest is meta-work, which does not create wealth but rather takes it from those who create it. Meta-workers are government workers, attorneys, and, as much as I loathe to say it, most consultants (not me, of course.) Real work is part of an economic river along which wealth flows. Meta-workers merely divert flow from the stream of wealth, leaving less and less for those who do real work. Diversions also make remove the incentive to do the hard work of wealth creation, without which there will be no middle class.

The first two and oldest streams of wealth are based on agriculture and small farms. There are few left in the United States, but they flourish in parts of Asia.

The next two, which created the middle class, are as recent as the industrial revolution, and based on manufacturing and its supply chains. These are long chains and a lot of people get to participate, adding value as the stream flows, thus creating a middle class. I guess it can be said that the middle class supports a middle class as long as they buy the stuff they make.

The newest stream, which I called Plus One, creates massive wealth, but isolates it in the hands of a few. This new wealth stream is often called high-tech. It is mostly based on microchips and programing and making the devices that carry them. Products are made on large scales in the most productive factories in the world, often with cheap labor and automation of repetitive tasks (using high-tech) in Asia. These devices are manufactured in short economic chains with the most creative elements being software, which is created by a few people, electronically flashed into chips, and then massively distributed, such as iPhones, iPads and iMacs. The wealth is concentrated in a few, and not in a middle class. (For example, Snapchat made two kids billionaires and helped no one get into the middle class.)

Given a short economic chain and the scale, there is little opportunity for building a middle class. San Francisco in an example of substantial wealth being created and concentrated in a few, driving prices higher and higher, becoming a city only for the extremely wealthy and the very poor.

In fact gadgets have become so powerful, they are threat to not only the middle class, but to those at the bottom of the economic ladder, as the minimum wage is raised to $15 an hour by government edicts helping no one. The government needs a better idea. I will propose a few.

The First Stream: Grow-and-Cut

The first tools of civilization (not weapons) might well have been a hoe, a shovel and a rake. Shortly thereafter, some clever person, maybe a woman, saw that the family grew a bit more food than needed, and decided to trade it to the neighbor in the next cave or hut for a piece of meat or a hide. The first stream of wealth had been created. It allowed a group of people to stay in one place, rather than roam around, building more permanent structures and stronger families. The family was needed to make grow-and-cut work. Thousands of years ago, we learned that families are the basis for civilization. We have never shown it to be any different.

Americans think Asians have strong families. Well, they do, but not in the way Americans imagine. Far more Asians than Americans understand the first principles of operating a small business:

  1. Nothing happens until something is sold
  2. Keep the cost down (family labor)
  3. Turn the inventory over
  4. Cash is king
  5. Everybody works

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Those who grow-and-cut need a family to work together, just like an efficient small company. They grow, harvest, transport and set up a stand in town. In Laos, Cambodia, Thailand, Vietnam, and China, I have seen three and four generations working together, with small children working in fields, transporting the days yield to town, and helping at the market, just a few miles away.

Every step of this short economic chain is visible and performed by family members. Several families meet daily at the town market, which has been there for decades, likely interrupted only by war. They have had the same spot for years, set up, tear down, clean, and then go home at the end of the day. It is orderly, with no fighting for space. They set up in the same spot every day, maybe on a table or a tarp. If you see an open spot, someone didn’t show up.

Some sell what they grow and cut, while a few add value in a cook pot, and have food stands. There are no holidays or sick leave, no vacation or health care benefits. You work or you don’t eat. You work or lose face in the family. There is not the closeness of love Americans think of, but the closeness of honor, respect, and obligation.

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Asians have managed to hold onto this culture of work as they have migrated to the west, at least for a couple of generations.

Many Chinese immigrated to Panama in the early 1950’s to escape Mao. Many businesses are still operating that were started then, and passed from generation to generation. There is a responsibility to support the family, and it is taken seriously.

I know one family where a teenage family member travels from one city to another to work for the family of his mother when school permits. His mother is of Chinese descent, has never been to China, but speaks Cantonese, the language of her parents. The son, whose father is Panamanian, only speaks Spanish. The culture his grandparents brought from China is fading.

The son runs the cash register in a pharmacy for one part of the family in the morning, works at a small hotel cleaning rooms in the afternoon, and works on his uncle’s farm digging and planting on the weekends. His aunt hands him a few dollars once in a while so he can go out with his friends. She treats him well. He is loved, but he better get out of bed and get to work. He knows his place. He is expected to work.

One day, when he thought his workday was over, his aunt said, “You have to run the cash register until closing. One of the Panamanian workers didn’t show up.”

“Aunt, you treat me like a slave. You never even pay me.”

I said, “Get to work and stop complaining. She doesn’t have to pay you. You are part of a Chinese family.”

Asians bring the culture of work to the U.S. as well. I wish it were more visible. Indian families buy and run hotels at every freeway stop, and newspaper stands at airports and in large cities like New York. Koreans buy and run vegetable and fruit-stands in New York. Chinese run restaurants in every city and town. Arabs run gas stations. I wonder what Americans do?

Asians understand what it takes to operate a small business, to feed themselves and the family, to stay out of the way of government. They ask the government for little more than the structure to operate, no matter where they go. Asians have left Asia not just to become capitalists, but to get away from communism and corruption. They make good Americans.

There are other cultures within the U.S. that see it as the responsibility of the government to support them without work, or to give them jobs that consist of meta-work, from which they cannot be fired once hired.

The Second Stream:; Grow and Kill

 There isn’t much difference between grow-and-cut and grow-and-kill. I suspect that grow-and-kill followed grow and cut. If animals were easy to hunt, then husbanding animals was not worth the effort. One could hunt for enough meat. Once trade was developed then animals were husbanded, protected and fenced or tied. This also strengthened families. The first corporate structure, the family, with a man and a woman in charge, working, teaching work, distributing work, defending, marketing and taking to market, and getting a fair price.

Textiles, fishing, sewing, creating shelter all took form based on growing and cutting, and growing and killing.

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Great wealth was usually not created but a lot of people were kept out of poverty. You didn’t get filthy rich, but you were part of a family, as the family was the central structure. Families are important to every culture. Without families, there is no culture, and no country to be held together. None of this works with a high rate of illegitimacy. If you are not part of a family, you are part of nothing.

In U.S. most high school graduates have no knowledge at all of these two fundamental forms of wealth creation. Food is carted out the front door of the grocery store. We have no idea how it got there. We have never seen the back door, or seen where it comes from. Most have never even seen a cow, pig or goat. Hardly any of us could tell wheat from barley. Few of us have planted anything, not even a flower, and far fewer have butchered a chicken. Few certainly have never stood over the anything the family has grown and taken to market, knowing if it does not, they will do without.

Those who work and live as a family in the first two streams of wealth understand far more than where food comes from. They know how a small business operates. They don’t look for a job. They look for a way to start and operate a business. The average American doesn’t know as much about the fundamentals of business as the average ten year old Asian. Asians know small family business.

In Asia, you might see a hog gutted and draped over the back of a motorbike, taken to market cut up and sold on a small stand, with the mother or sister sitting surrounded by hog parts.   You would see fish in plastic tanks on the sidewalk, pulled out, gutted and cut, about as fresh as you can get them. You would see a motorbike with racks of chickens tied feet to a rail, pulled off, then handed to you. For a bit extra, you can have its head cut off, gutted and plucked. The markets are all crowded with people walking. There are no cars in the way. It’s fun. It’s a community. People talk to one another, rather than push a cart and text or talk on the phone, and buy things in pretty boxes that are chemically preserved.

This system might be thought of as backward in so-called first world countries. The West is far more efficient. But there is a cost to our efficiency, and that cost is associated with the knowledge Asians have of work, working together and business fundamentals at an early age. Asians know that NOTHING happens until something is sold, whereas few Americans have ever sold anything. They want jobs and meta-work, not work.

Government by Thieves, Tyrants and Kings; Democrats and Republicans

Shortly after these two ancient and stabilizing forms of wealth through work and trade were developed, lazy groups were formed, all thieves. They stole through violence, raiding and killing. Land barons saw the need for building defense systems, funding in the only way possible; taxation of the productive class. As they grew powerful, the taxing protectors saw themselves as superior, claiming themselves kings, and the basis for civilization and order. It changed form over time, as we held elections, but the culture of meta-work was established.

I hope we can reverse it.

Part three is to follow soon

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